Question: With Brickell Avenue running out of land, condo developers seem to be targeting neighborhoods just to the west. How far west can condo builders realistically go and still attract today’s buyers?
No market in South Florida is more active right now with new condo development than the Brickell Avenue Area of Greater Downtown Miami.
The number of new condos proposed for the Brickell Avenue Area submarket – which stretches about 20 blocks long from the Miami River south to the Rickenbacker Causeway on the east side of I-95 – currently accounts for nearly 29 percent of the more than 35,100 South Florida coastal units proposed in all of Miami-Dade, Broward and Palm Beach counties, according to the preconstruction condo projects website CraneSpotters.com.
(For disclosure purposes, my firm operates the website.)
Developers have already announced plans to build 32 new condo towers with more than 10,050 units in the Brickell Avenue Area out of a total of 61 towers with nearly 18,300 units in all of Greater Downtown Miami.
To put it another way, the Brickell Avenue Area submarket has more than two times the number of new condo units announced within its physical boundaries than the entire barrier island of Miami-Dade County, where 4,565 units are proposed.
On the Miami-Dade County barrier island, developers have announced plans to build more than 1,350 new units in Miami Beach, nearly 1,300 units in the Bal Harbour-Surfside-Bay Harbor Islands market and nearly 1,925 units in Sunny Isles Beach.
In the Brickell Avenue Area, developers are betting this urban submarket is – and will continue to be – the hottest address for anyone living or investing in Greater Downtown Miami, despite a growing reputation for having generally higher condo prices, arguably lesser views and increasingly heavier traffic.
Some key factors contributing to the bullish outlook by developers for the Brickell Avenue Area are the recent emergence of busy retail space, restaurants and nightlife at places such as Mary Brickell Village.
The new $1.05 billion Brickell City Centre mixed-use complex under construction on South Miami Avenue and Eighth Street is expected to only bolster the appeal of the Brickell Avenue Area.
Before new owners and renters finally filled up the nearly 10,100 condo units built in the Brickell Avenue Area during the last boom-and-bust cycle, this submarket was a proverbial “ghost town” after 6 p.m., when the office towers emptied of white-collar employees who headed off to their residences that were usually located elsewhere.
This recent past of the Brickell Avenue Area is important to consider, as it can argued the discounted prices resulting from the 2007 real estate crash in South Florida, more than the lifestyle the area affords residents, is what incentivized buyers and renters to finally live there.
Back in 2009, condo resales in the Brickell Avenue Area sold at an average price of $225 per square foot between January and July. In the same seven month period of this year, condo resales traded at an average price of $421 per square foot, representing an 87 percent increase compared to the bottom of the last real estate cycle, according to data from the Southeast Florida MLXchange.
For what it is worth, condo resales prices in the Brickell Avenue Area are still down five percent from the peak of the market in 2006, when units traded at an average of nearly $445 per square foot.
Currently, more than 1,125 condo units – about 13.4 months of supply – are on the resale market at an average asking price of $510 per square foot.
A healthy condo market is typically thought to have six months of inventory. More than six months usually suggests a buyer’s market, while less than six months indicates a seller’s market.
On the preconstruction front, the mean minimum asking price for new condo units in the Brickell Avenue Area is nearly $565 per square foot, compared to about $532 per square foot overall in Greater Downtown Miami and $750 per square foot in all of coastal South Florida, according to the CraneSpotters.com Developers Price Survey for August.
The Brickell Avenue Area rental market has less than two months of supply of condos available for lease despite a median asking price of $2.56 per square foot monthly.
In the first seven months of 2014, tenants leased nearly 250 condos every month in the Brickell Avenue Area at a median price of $2.31 per square foot monthly. In 2010, the last year in which data is available, tenants leased an average of 167 condos each month at a median price of $1.68 per square foot.
Today’s median rental price in the Brickell Avenue Area is about 38 percent higher than in 2010.
As prices rise in the Brickell Avenue Area, buyers and tenants could start to look for alternative locations that are nearby and more affordable.
Some developers are already attempting to lure away prospective buyers and tenants from the Brickell Avenue Area with projects just west of I-95 in the nearby neighborhoods of Little Havana and The Roads.
Other developers are attempting to create alternatives to the Brickell Avenue Area submarket with ambitious plans in Greater Downtown Miami’s Central Business District pegged to the planned Miami Worldcenter and the Biscayne Boulevard Corridor, with the emerging trio of neighborhoods in Edgewater, Midtown and the Design District.
The unanswered question going forward is which submarket will emerge as the next affordable alternative if condo purchase prices and rental rates keep rising at the same strong pace in the Brickell Avenue Area.
Thought Of The Week: Sixth Annual State Of South Florida Condo Market Seminar
For the sixth straight year, I am scheduled to make a keynote speech and distribute a statistical White Paper overview about trends in the South Florida condo market east of I-95 in Miami-Dade, Broward and Palm Beach counties.
This year’s “State Of The South Florida Condo Market Seminar” will focus on new and existing towers and is scheduled for 5.30 p.m. on Thursday Aug. 28 in Hall D of the Miami Beach Convention Center.
My presentation will serve as a VIP kickoff event for the first annual Miami New Construction Show that runs from Aug. 29 to 31 in the same venue.
Tickets are available at CraneSpotters.eventbrite.com
Peter Zalewski is a real estate market consultant, non-practicing licensed real estate broker and columnist for The Real Deal who now answers reader questions about the South Florida real estate market in a new weekly Friday column. Questions and comments can be sent to southfloridanews@therealdeal.com. The TRD editors will choose which submissions will be addressed.